Germany’s high inflation environment, why has it not affected Amazon?

Why hasn't Amazon been affected by Germany's high inflation environment?

According to BusinessDialogue, the latest research from Remazing shows that in the sustained high inflation environment of Germany, the prices of goods in the online retail market have hardly changed. As one of the largest e-commerce platforms in Germany, the price data of Amazon’s German site intuitively reflects this trend.

Analysis shows that the prices of goods on Amazon’s German site are significantly lower than the country’s overall inflation level, and the average prices of many categories are even lower than last year. Although a few categories have slightly increased in price, overall prices have hardly changed.

Remazing provides online platform sales support for more than 100 well-known brands. In the past year, it has continuously tracked the price changes of these brands and concluded that inflation has almost no impact on Amazon, and the prices of some goods are even lower than the prices of the same period last year.

The prices of Amazon’s German site categories hardly change

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The survey shows that on Amazon’s German site, the average prices of many categories have decreased compared to a year ago. For example, the average price of baby products is 73.05 euros, compared to 75.68 euros a year ago; the average price of beauty products has decreased from 12.34 euros a year ago to 12.06 euros; and the average price of personal care products has decreased from 12.46 euros a year ago to 12.33 euros.

A few categories have seen price increases. The most obvious are home and furniture categories, where the average prices of surveyed products have risen from 134.45 euros to 147.01 euros over the past year.

Remazing’s survey results are consistent with Adobe’s survey of the US market. Adobe’s survey shows that in March of this year, compared to last year, the prices of online retail goods in the US fell by 1.7%, while the Consumer Price Index (CPI) for the entire retail industry rose by 5% during the same period.

According to Adobe’s analysis, in the US e-commerce market, the average price of electronic products has decreased by 12.9%; the average price of toys has decreased by 6.6%; and the average price of home and garden equipment has decreased by 4.9%.

Why is Amazon immune to inflation?

Regarding why Amazon’s prices are not affected by inflation, Remazing’s analysis shows that the most important reason is Amazon’s fair pricing policy. Amazon’s algorithm is highly sensitive to price increases, and once the price goes up, the product’s search ranking may drop at any time.

The large number of third-party sellers on the platform, sluggish consumer demand, and increasingly fierce competition also have a constraining effect on price increases.

The second reason is the platform sellers. Compared to offline physical retail, e-commerce business structures are more streamlined, requiring fewer manpower and resources; as a result, e-commerce operating costs are lower, which helps maintain price advantages.

However, since prices have hardly risen, the sales of many e-commerce companies have also declined. For example, Germany’s Otto Group’s online sales fell by 8% in the last fiscal year.

In addition, Amazon and other e-commerce brands still hold a large amount of inventory reserved during the pandemic period. Therefore, there is huge pressure to clear inventory in the market, and merchants need to clear inventory at low prices to make room for new goods, which further brings pressure on profitability.

Research shows that under the current multiple pressures of inflation and high inventory, e-commerce companies will be more cautious when choosing inventory to store, which will bring opportunities for price increases. Therefore, in the long run, it is expected that the prices of online sales will eventually increase closer to the level of inflation.

Writer✎   Ashley/AMZ123

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